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The female advantage – The Boston Globe

IN THE CUTTHROAT world of business, companies are always looking for ways to increase their profits. They outsource to Bangalore. They endlessly tweak their “brands.” Some even try to shed their least desirable customers.

Now, a growing number of consultants and corporate leaders swear by a new strategy to boost the bottom line, one that departs from the standard bag of tricks: put more women in charge.

Several studies have linked greater gender diversity in senior posts with financial success. European firms with the highest proportion of women in power saw their stock value climb by 64 percent over two years, compared with an average of 47 percent, according to a 2007 study by the consulting firm McKinsey and Company. Measured as a percent of revenues, profits at Fortune 500 firms that most aggressively promoted women were 34 percent higher than industry medians, a 2001 Pepperdine University study showed. And, just recently, a French business professor found that the share prices of companies with more female managers declined less than average on the French stock market in 2008.

This mounting body of evidence represents an important twist in the debate over women in business. For decades, women’s advancement has been seen as an issue of fairness and equality. Now some researchers are saying it should also be seen in another way: as a smart way to make money.

“The business case is so strong,” says Alison Maitland, senior visiting fellow at Cass Business School in London, and coauthor of the 2008 book “Why Women Mean Business.” “We need more women in senior management.”

The numbers are certainly striking, but their meaning is not yet fully understood. Correlation does not equal causation: While the link between higher levels of female leadership and profits is fairly well-established, it’s less clear that women are directly responsible for the success. Rather, companies of a particular kind – forward-thinking, adaptable – may both turn higher profits and promote more women. And some of the data on women’s influence are mixed. One recent study, for example, found that the presence of senior women just below the CEO led to higher profits – but the effect of female CEOs was neutral or slightly negative.

And if the high-level women do directly cause better performance, it is not entirely clear why. One possibility is that women enjoy an edge in understanding the consumer market: by some estimates they make 80 percent of consumer purchases. Another theory is that gender diversity stimulates more vigorous discussions, resulting in smarter decisions. More controversially, women may on average exhibit a different, and fruitful, leadership style.

Some analysts even suggest that women might have been able to temper the excesses that led to the current financial crisis. The culprits, one can’t help but notice, were overwhelmingly male. More women at the table, some speculate, might have served as a prudent counterweight to reckless, testosterone-addled men. In fact, Iceland has dispatched a team composed largely of women to clean up after its collapse.Continued…